Family Attribution w/ Trust - Adult Son

[jmartin]

Facts:

- Father A owns 25% in company A

- A Trust in the name of Father A owns 25% in Company B

- Three other partners each own 25% in company A and each has a Trust in their name which also own 25% each in company B.

- Company A and B are part of a controlled group and in the same plan.

Question is in regards to Father A's adult Son (Son A) who would like to contribute in the plan. The son will work for and be paid from Company B.

I believe, for controlled group purposes (section 1563?) anyways, Father A is attributed ownership of Company B since he is the beneficiary of the Trust. The adult son would not be attributed any ownership because: A) He is over 21 and B) his father does not own more than 50% of either company.

However for HCE purposes (section 318) would the same rules apply? Or would the Son be attributed ownership from the father who was attributed ownership from the trust.

My initial feeling was the he would be an HCE/Key for ADP,Coverage,Top Heavy, etc. Almost sounded like double attribution and after going back and forth between the two rules I wanted to make sure I wasn't mixing them up.

[ETA Consulting LLC]

The son will be attributed what the father owns. Double attribution does not apply since there is no prior attribution under section 318. The father is owner of the trust ownership (and that is not a 318 issue). Therefore, the son is considered (for HCE and Top Heavy) to own what the father owns.

Good Luck!